Blockchain- Explained!
Whats the deal with blockchain? Is it a silver bullet? I try to explain what the blockchain is at a middle level that most people will understand. [Middle complexity]
Blockchain is probably the biggest buzzword of recent days. From cryptocurrency to data storage, it seems like you can do anything with it. But, there’s a lot of misconceptions about it, and it’s not a silver bullet. So, I thought that I’d take some time and explain what blockchain is, at a middle level that anyone can understand.
Blockchain is a database
First things first. Blockchain is a database. Just like the one you’re using right now to read this post, it’s a book of records. But, unlike the databases you’re used to, it’s distributed, and stores data in huge cryptological equations. That means there are no central authorities that manage it. Anyone with access to the internet can connect and start writing to it. And, more importantly, anyone can verify the entries added into this database by other people.
How does this work?
Well… Let’s go back in time for a bit! Think about how we used to write down our accounts in ancient societies. We’d usually have someone that was trusted enough that would keep track of what everyone had and keep it secure from theft or tampering and also make sure nobody was cheating or lying about their accounts. This ‘someone’ was called the ‘Banker’ and was usually also someone who had some power above others in society: Enough power so that everyone else could trust him not to steal their money; but not so much as to become a tyrant himself!
With blockchain, this ‘someone’ is replaced by every single person connected to the network! Everyone has an incentive in keeping everything truthful and everybody agrees on what is true because they have an incentive in doing so: They’ll get paid if they do well enough (in cryptocurrency) or lose their money if they don’t cooperate properly with others (like if they tried acting like two different people). It’s sort of a self-organizing, self-regulating organization if you will. Because of that, we call it ‘decentralized’.
This means there are no central authorities that can modify the data in the database. Only people who have enough power to do so and are connected to the network can write to it. So, if you connect to a network and someone tries to send you money that doesn’t belong to them, everyone else connected will be able to tell that something is wrong and reject that transaction!
Is blockchain made of blocks?
No! Each entry in the database is called a ‘block’. The database keeps track of all the blocks that were created before it. Each block contains all the information in previous blocks and is connected to them with a hash function. This is why we call it blockchain. A chain of blocks.
This makes sure that nobody can go back and change past entries in the database; as they’d have to make changes to all those past entries at the same time, which is practically impossible! That’s why you can trust blockchain as being safe for the storage of anything from money to pictures.
What is cryptocurrency?
For a longer explanation check out my post, Crypto- Explained! But essentially, it’s storing all of the amount of a “coin” that every user has on the blockchain (again, in huge mathematical formulas). This removes conventional currency, such as USD or the Euro from the equation, and allows people to trade the cryptocurrency, for example buying a hot dog with Bitcoin.
If you’re wondering why this is useful whatsoever, check out my Intro to Crypto Philosophy article!
Well-known cryptocurrencies include Bitcoin, Etherium, and Dogecoin.
How are transactions made in blockchain?
Another thing people ask me about blockchain is how do people send money onto it? How do they make transactions, if there’s no central authority? The simplest method is direct payment. There’s also something called smart contracts, but that’s more complicated than this post needs.
If Alice wants to send Bob some money she sends him her new public key (remember public keys work like email addresses) and Bob sends her his new public key so she knows where to send him his money.
Then Alice uses her private key (it works like a password) and signs off on the transaction so Bob knows it really came from her and nobody else could have sent that transaction onto the network.
What happens with this concept is that every time someone makes a transaction they get some part of their balance returned back to them as an output and the rest gets sent off elsewhere as an input for another person’s balance. So when Alice will want to send 10 bitcoins. she will be involved in two transactions — one where she received 5 bitcoins (an input) and one where she sent 15 bitcoins. Therefore, she’ll have transferred 10 coins out of her account, which will show up in Bob’s account. Even though 15 coins were involved in the transaction, the net result will be what you expect.
As soon as the bitcoin transaction is initiated, the coins become unspendable; just like sending banknotes out of your account makes them unusable in future transactions because they’re now part of somebody else’s account!
Don’t worry if this part doesn’t make a ton of sense yet; it’s really complicated, and a little convoluted to tell the truth.
How can you store files in the blockchain?
Storing stuff in the blockchain is a bit more complicated than just sending someone money. But it’s still pretty simple and it just requires you to remember one thing: Private keys are like passwords to your account. If you lose them, your account will be lost forever! And if someone else gets hold of them, they’ll be able to use your account as if they were you! So, make sure you keep those keys safe and only give them out when you really need to. Don’t ever give anyone your private key unless that person is in control of the money you’re storing there — because otherwise they could take it all and leave with nothing for you!
You send files onto the blockchain by using an address (that looks like an email address) that has a private key attached to it. You send content onto that address with a file transfer protocol like FTP. Once that file arrives onto the blockchain, anyone can download it from there; but only if they have the private key associated with that file’s public key will they be able to unlock its contents and see what’s inside!
Downsides
Blockchain is really not a silver bullet. While it’s great for storing little, important files, and files that only should be owned by one person (this is what NFTs are!), blockchain is quite inefficient for storing stuff that needs to be frequently referenced and retrieved. Think of blockchain as a bank security box with built-in fraud protection; it’s really secure, but can be a pain to get stuff in and out of.
What happens when someone tries to change something?
I hear people asking me: What happens when somebody tries changing something on the blockchain? Does everyone notice this? And how does this happen? Well, first things first: There are no “somebodies”. The people who run full nodes on their computers are what we call ‘miners’. They’re responsible for running the network and keeping track of everything. They get paid in cryptocurrency (for example Bitcoin) for helping run this network! These ‘miners’ keep an eye on everything happening on the network all day long because their business depends on it — so rest assured that no one will be able to tamper with anything without being noticed immediately by these people who have an incentive in keeping everything truthful! If someone did try changing something other miners would notice this attempt immediately; as data stored onto blockchains is easily verifiable by anyone who wants to do so — so they’d know right away if something was wrong. The miners would then stop accepting any new transactions until everyone agreed upon what was going on — which means until all those attempting incorrect changes agree upon how things should look again — or else those miners would simply start creating a new chain where everything is correct again (as soon as more than half of all miners do so). In other words: They’d create a new blockchain where everything is correct again and everyone would have to agree on using it or keep using the old one.
There you have it! Hopefully, this explained blockchain in a simpler way than most explanations are. I’ll be releasing another post soon with an even simpler explanation that I wrote for my second-grade nephew.
If you’re interested in learning more about blockchain, philosophy, AI, or more, follow me Ada G Idell! I’ll be posting an even simpler explanation soon, so clap today and watch for tomorrow!
